Global overview
It was steady as she goes for the U.S. dollar and its big peers ahead of America’s monthly jobs report. The calm that washed over currency markets nudged the greenback just below its strongest level in about a month versus the euro, sterling, and Canadian dollar. The dollar has added to its late summer revival as a parade of generally solid U.S. data continued ahead of today’s U.S. employment report. The U.S. economy is on a record run as it has created at least 200,000 jobs for 30 consecutive months. That impressive streak may have continued in July with forecasts suggesting employers added 200,000 after a gain of 209,000 in June. Slower but still strong hiring likely kept unemployment around 3.6%, not far from the lowest level in more than 50 years. Today’s jobs report will be one of two that the Fed gets to parse before it issues its rate decision in September.
Euro steadies above 4-week low
The euro hovered near four-week lows and was at risk of another weekly decline as markets focused on the downside of mixed European data. Euro zone consumer spending unexpectedly contracted by falling 0.3% in June, while German factory output surprisingly grew and by a strong 7% for the same month. While robust, the bounce back in German factory growth may not have legs, given the weak state of the broader economy. A close below 1.10 for EUR/USD would mark the third weekly decline in as many weeks.
Sterling falls 4 cents from recent highs above 1.31
The UK pound was stuck near one-month lows a day after the Bank of England intensified its fight against the highest inflation among major economies. The BOE’s quarter point hike to 5.25% was on the low end of expectations for a bump by as much as a half point. London offered a conditional outlook for future rate increases that Gov. Andrew Bailey said would be “evidence driven.” This week’s UK rate decision validated the view of area borrowing rates peaking at lower levels below 6% as officials expect inflation to decelerate from 7.9% to below 5% by year-end.
Canadian hiring contracts; U.S. job growth underwhelms
Disappointing Canadian jobs data weighed on the loonie and pushed it to four-week lows against the greenback. Canada unexpectedly shed 6,400 jobs in July compared to forecasts of a gain of around 20,000. Unemployment ticked up to 5.5% from 5.4%. The data offered new evidence of a moderating Canadian economy which raised the bar for policymakers to hike rates from 5%. The greenback wavered following mixed news on America’s labor market, though bulls should be emboldened by higher wage inflation and lower unemployment. U.S. nonfarm payrolls increased by 187,000 in July, below forecasts of 200,000, while June hiring was downgraded by 24,000 to 185,000. The pace of hiring was still strong enough to lower unemployment to 3.5% from 3.6%. Meanwhile, the Fed won’t take any comfort from news that wage inflation steadied at a 4.4% annual rate, defying forecasts to moderate to 4.2%. While mixed, the jobs data appears hot enough to keep another Fed rate hike in the conversation.
Dollar camped near peaks
Table: rolling 7-day currency trends and trading ranges
Key global risk events
Calendar: Jul 31-Aug 4
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
